Microfinance and new technologies

Microfinance, aiming at the poorest populations has two obligations: to provide sufficient funds for MFIs to be able to cover risk and offer more loans and overcome the obstacle of distances, which are often considerable, separating the institutions from their clients.

Web and mobile phone technologies are the sector’s best allies today to guarantee its development. Some examples:

Microcredit on line: cancel out the intermediaries

The P2P represents a model of computer networks founded on sharing. The most well known is Napster, which was a service for sharing music files between internet users which had lightning success (1999/2001). Adapted for finance, peer to peer enables small entrepreneurs in developing countries to contact internet users who then become their solidarity lenders.

The first project of this kind emerged in 2005, when the American Matt Flannery launched Kiva, in order to connect internet users with borrowers in developing countries. Since its creation, the site has totalled 500.000 lenders.

Today there are about fifteen platforms operating on this model: each site selects a series of MFIs which send the description of projects awaiting funding. Internet users can consult loan requests on line and choose the person to whom they wish to lend money directly and determine the amount (10 euros minimum), for a set period (generally less than a year).

As Arnaud Ventura, co-founder of PlaNet Finance explains, on line microcredit sites enable “the intermediaries to be cancelled out so that people with money can lend to those without.”

Microfinance on your mobile: distances abolished

It is possible to have a mobile phone but be excluded from banking services. Two billion people will be in this category in 2012, according to a study by the GSMA and the CGAP. Hence the idea came about to use one to develop the other, which should enable “banking services to be provided at a minimum cost” according to Maud Chalamet, director of PlaNet Finance in Brazil. The idea is to associate a bank account with a SIM card or the user’s telephone number.

But these new services are only at their beginnings. Until now mobile banking only really took off, as for M-Pesa in Kenya, for peer to peer money transfers. A service which is adapted for families separated between the city and the countryside for example, as Arvind Ashta, Professor of microfinance at the ESC Dijon underlines.

But there is still the problem of convincing telephone operators all over the world and guaranteeing the terms of the contract: the winners must remain the customers, just as much as the sellers.